Manager: Hengfu Hsu, Analytic Investment LLC
Models: Deep Value, Earnings Growth, Opportunistic Value, Enterprise Value, Focus Value, Dividend
According to Yahoo! Finance, the S&P 500 index finished the month of April with 2.85% gain, slightly above its 10-year average April return of 2.712% from 2001 to 2010.
As of April 30, 2011, the US equity market condition remains favorable based on the following factors we use to manage risk in our models:
- Equity Earning Yield Over Treasury Yield (Cheap, Balanced, or Expensive): Cheap
- Equity Earning Trend (Up, Sideway, or Down): Up
- Credit Risk (Low, Normal, High, or Dangerous): Low
- Equity Volatility (Low, Medium, High, or Dangerous): Low
- Equity Money Flow (Positive, Neutral, or Negative): Negative
- Yearly Equity Price Trend (Up, Sideway, or Down): Up
- Monthly Equity Price Trend (Overbought, Sideway, or Oversold): Sideway
Historically, April has been a strong month for equities, but as the market heads into summer, traders traditionally take profits and close positions to get ready for vacation, and trading volume starts to dwindle. We expect to see volatility trending higher in the summer as trading volume drops. However, as of April 30, 2011, S&P 500 earnings are expected to make an all time high this year, while the S&P 500 index is still more than 200 points away from its all time high reached in 2007. So it is possible we’ll see more investors stay in the market this summer to participate in one of the best corporate profit years in history.
Models Review
In April, all our Covestor models remained fully invested based on our computer algorithms. The phrase “fully invested” means that our models use up to 100% of available cash. None of our Covestor models use any form of leverage or margin.
According to Covestor’s calculation, six of our seven models underperformed the S&P 500 index in April. Dividend is our only Covestor model that outperformed the S&P 500 index in April, with a 4.35% return. The Dividend model holds 50 defensive dividend stocks. Its recent strength indicates investors’ falling appetite for risk, as the market heads into its summer doldrums.
Though we saw our Covestor models largely underperform the market in April, our investment strategy remains the same. We rely on our computer algorithms to indicate buys of undervalued stocks and sells of overvalued positions, to monitor market conditions, and to manage risk in all models, so that human emotion and buy-sell bias are completely eliminated from the investing process, unnecessary market timing is avoided, and continuous participation in the market is enabled in the effort to produce long-term growth.
Disclaimer
Opening accounts of Analytic Investment Management LLC’s models through Covestor is not personalized investment advice, and Analytic Investment Management LLC does not take Covestor clients’ personal financial needs into consideration. Investing in the financial markets involves risk, including the risk of principal loss. Don’t invest with money you can’t afford to lose. Information in this report is in no way intended as personalized investment advice and should not be interpreted as such. Past performance is not necessarily indicative of future results. Performance results do not take into account any tax consequences. Focus Value and Focus ETF models are concentrated portfolios with less than 20 positions. Concentrated portfolios carry significantly more risk than diversified portfolios and may not be suitable for every investor.
Sources:
S&P 500 Index performance information from Yahoo Finance: https://finance.yahoo.com/q/hp?s=%5EGSPC&a=00&b=3&c=1950&d=04&e=3&f=2011&g=m
